April 2009
Authors:
Ronda P. Moore, D.V.M. ronda.moore@klgates.com
+1.617.261.3167
Suzan Onel suzan.onel@klgates.com
+1.202.778.9134
K&L Gates comprises approximately
1,900 lawyers in 32 offices located in
North America, Europe, and Asia, and represents capital markets participants, entrepreneurs, growth and middle market companies, leading FORTUNE
100 and FTSE 100 global corporations, and public sector entities. For more information, please visit www.klgates.com
.
Massachusetts medical device and pharmaceutical companies will soon become subject to the most stringent sales and marketing activity regulation in the country.
On July 1, 2009, a Massachusetts regulation entitled, “Pharmaceutical and Medical
Device Manufacturer Code of Conduct” goes into effect. The regulation implements a 2008 Massachusetts law that requires companies to report to the state government the value, nature, purpose, and recipient of any payment or economic benefit to a health care practitioner that is valued at $50.00 or more. The regulation also:
(1) enumerates prohibited conduct for sales and marketing activities, (2) mandates that certain gift, payment, and reimbursement activity be conducted under a formal written agreement, (3) requires the adoption of a code of conduct in compliance with the regulation, and (4) requires annual monitoring and certification of compliance.
Penalties apply for each transaction that does not comply.
In addition to the application of these regulations within the Commonwealth of
Massachusetts, some activities of Massachusetts companies that extend beyond the borders of Massachusetts are also regulated under the provisions. The information provided below highlights some of the most salient features of the Code of Conduct.
We urge Massachusetts medical device and pharmaceutical companies to review these regulations closely and move swiftly to take appropriate action necessary to implement them. For the majority of Massachusetts medical device and pharmaceutical manufacturing companies, from start-up to established companies, these regulations will require profound changes in marketing and sales activities.
Only a few months remain before the regulations go into effect. Compliance is required by July 1, 2009.
A pharmaceutical or medical device company that is:
• engaged in the production, preparation, propagation, compounding, conversion or processing of prescription drugs, biologics, or medical devices, either directly or indirectly, by extraction from substances of natural origin or independently by means of chemical synthesis, or
• directly engaged in the packaging, repackaging, labeling, relabeling or distribution of prescription drugs, biologics or medical devices.
Expressly excluded from regulation: health care practitioners, physician practice, home health agency, hospitals licensed under M.G.L. c. 111, s. 51, a wholesale drug distributor licensed under M.G.L. c. 112, s. 36A or a retail pharmacist registered under M.G.L. c. 112, s. 37-39C.

Medical device and pharmaceutical companies must:
• adopt a marketing code of conduct in compliance with the regulations;
• adopt and submit to the Massachusetts
Department of Health (DPH) a description of the company’s training program on the marketing code of conduct;
• conduct annual audits to monitor compliance;
• certify to the DPH that the company is in compliance with the regulations;
• adopt and submit to the DPH the company’s policies and procedures for investigating, taking corrective action, and reporting non-compliance with the regulations; and
• identify and provide the contact information of the company’s compliance officer to the DPH.
Additionally and specifically for pharmaceutical companies that use non-patient identified prescriber data to facilitate communications with health care practitioners the company must:
• maintain the confidential nature of and develop policies regarding the use of prescriber data;
• educate employees about these policies;
• designate an internal contact person to handle inquiries concerning prescriber data;
• identify appropriate disciplinary action for noncompliance; and
• comply with health care practitioner requests not to make data available to company sales representatives.
Pharmaceutical companies that use a health care practitioner who is a member of a committee that sets formularies or develops clinical guidelines and also serves as a speaker or commercial consultant for the company must also disclose the nature and existence of the relationship with the company.
Pharmaceutical and medical device companies must disclose to the DPH payment of any fee, subsidy, or economic benefit to a “covered recipient” with a value above $50.00 in connection with the company’s sales and marketing activities:
•
“covered recipient” is defined as a person authorized to prescribe, dispense, or purchase prescription drugs or medical devices in the commonwealth, including a hospital, nursing home, pharmacist, health benefit plan administrator, or a health care practitioner. A person who otherwise meets this definition but is a bona fide employee of a pharmaceutical or medical device manufacturing company shall not be a covered recipient. Additionally, consumers who purchase prescription drugs or medical devices are not covered recipients.
•
“sales and marketing activities” include advertising, promotion, or other activity that is intended to be used or is used to influence sales or market share of a prescription drug, biologic or medical device; to influence or evaluate the prescribing behavior of a covered recipient; to promote a prescription drug, biologic or medical device; to market a prescription drug, biologic or medical device; or to evaluate the effectiveness of a professional pharmaceutical or medical device detailing sales force. Also included is product education, training, or research project that is designed or sponsored by the marketing division of a pharmaceutical or medical device manufacturing company or has marketing, product promotion, or advertising as its purpose.
• disclosure must be made annually on or before
July 1 of each year, beginning July 2010, to the
Department of Health.
• disclosure must include the value, nature, purpose, and recipient of any fee or other economic benefit with a value greater than
$50.00 (excluded sales and marketing activities include clinical trials and genuine research particularly where the primary purpose is to generate data in support of an FDA filing);
April 2009 2

• annual disclosure reports must be accompanied by a fee of $2000.00. The first fee is due July
1, 2009.
• companies must certify that the information provided in the disclosure is true;
• the $50.00 threshold is computed on an individual transaction basis and shall not be aggregated.
Companies regulated by the Massachusetts
Pharmaceutical and Medical Device Manufacturer
Code of Conduct may not pay for meals for health care practitioners that:
• are part of an entertainment or recreational event;
• are offered without an informational presentation made by a marketing agent;
• are offered, consumed or provided outside of the health care practitioner’s office or a hospital setting; or
• are provided to a health care practitioner’s spouse or other guest.
Companies regulated by the Massachusetts
Pharmaceutical and Medical Device Manufacturer
Code of Conduct may not provide financial support for:
• the cost of travel, lodging, or other personal expenses of any non-faculty health care practitioners attending a CME event, 3rd party scientific or educational conferences, or professional meetings;
• funding to compensate for time spent by health care practitioners participating in any CME event, 3rd party scientific or educational conferences, or professional meetings;
• meals provided directly to a health care practitioner at any CME event, 3rd party scientific or educational conferences, or professional meetings;
• sponsorship or payment for CME that does not meet the standards for Commercial Support as established by the Accreditation Council for
Continuing Medical Education or equivalent, or that provides payment directly to a health care practitioner.
As specifically applies to a pharmaceutical manufacturing company, the company:
• shall separate its CME grant-making functions from its sales and marketing departments, and
• shall not provide any advice or guidance to the
CME provider regarding the content or faculty for a particular CME program funded by the company.
Companies regulated by the Massachusetts
Pharmaceutical and Medical Device Manufacturer
Code of Conduct may not provide health care practitioners:
• entertainment or recreational items of any value, including tickets to the theatre, sporting events, concerts, sporting equipment, or vacation trips;
• payments of any kind including cash or cash equivalents, equity, “in kind” or complimentary items such as pens, coffee mugs, gift cards, etc. either directly or indirectly, except as compensation for bona fide services;
• any grants, scholarships, subsidies, supports, consulting contracts or educational or practice related items in exchange for prescribing, disbursing, or using or committing to use prescription drugs, biologics, or medical devices; or
• any other payment or remuneration in cash or in kind, directly or indirectly, including any rebate or “kickback” that is prohibited under applicable federal or state fraud and abuse laws.
April 2009 3

While the regulations ban a wide range of sales and marketing activities, they acknowledge that certain activities remain permissible and not prohibited. For example, companies may provide reasonable, fair market value compensation or reimbursement to a health care practitioner serving as speaker or a faculty organizer or consultant for a CME event, 3rd party scientific or educational conferences, or professional meeting. The company may sponsor a third party scientific or educational conference, charitable conference or meeting, or professional meeting, where the payment is made directly to the conference or meeting organizers. The use of hotel facilities, convention center facilities or other special event venues for CME or other third party scientific, educational or professional meetings or conferences is not prohibited.
The regulations also do not prohibit reasonable compensation for bona fide services, or other out-ofpocket expenses of the health care practitioner in performance of such services where the compensation and reimbursement is specified in and paid for under a written agreement. Also permissible are payment or reimbursement of reasonable expenses for travel and lodging related to technical training of health care practitioners on the use of a medical device if the commitment to pay these expenses and the amounts or categories of reasonable expenses to be paid are described in the written agreement for the purchase of the device.
The purchase of advertising in peer-reviewed journals, the provision of prescription drugs to health care practitioners for distribution to patients, and the provision of reasonable quantities of medical device demonstration and evaluation units to a health care practitioner to assess the use and functionality of the unit are permitted. Further permissible activities are price concessions such as rebates and discounts in the normal course of business, provision of reimbursement information and support regarding products as long as the purpose is not to induce the purchase, lease, recommend, use, or arrange for the purpose, lease or prescription of products.
The provision of payment or free outpatient prescription drugs to health care practitioners for the benefit of low income individuals through “patient assistance programs” provided the program meets the criteria in accordance with the guidance available from the U.S. Department of Health and
Human Services or is otherwise permitted under applicable federal laws and regulations including the “Anti-Kickback Statute” (42 U.S.C.1320a-7b) is permissible. Charitable donations are permissible provided that the donation is not in exchange for prescribing, reimbursing or using prescription drugs, biologics or medical devices or for a commitment to continue these activities, and does not otherwise violate the provisions of 105 C.M.R.
970.000.
Knowingly and willingly violating the regulations is punishable by a fine of $5000.00 for each transaction, occurrence or event.
Under these regulations, multiple entities are authorized to enforce the statute, including the attorney general, the district attorney with jurisdiction over a violation, or the Massachusetts
Department of Public Health.
According to a recent Guide published by the
Massachusetts Department of Public Health in conjunction with the Massachusetts Pharmaceutical and Medical Device Manufacturer Code of
Conduct, these regulations apply to “activities that either take place in Massachusetts” or “involve a
Massachusetts-licensed health care practitioner.” In particular, the disclosure requirements apply to any
“sales and marketing activity” directed at and benefiting a Massachusetts covered recipient.” As a result, activities occurring outside of Massachusetts are subject to the regulation if they involve a
Massachusetts licensed health care practitioner or
“covered recipient.” It is currently unclear whether the statute applies only to companies incorporated or resident in Massachusetts or if it reaches all companies doing business in the state.
April 2009 4

While the Massachusetts regulation reflects elements of various state laws and third party voluntary codes of conduct, such as those developed by PhRMA,
AdvaMed, and others, it is the most stringent to date.
Notably, it is also the first state law that requires and publicizes disclosure of device company payments to health care practitioners. This may be the development of a confusing patchwork of state-bystate marketing. In either case, the regulatory spotlight will clearly remain on potential conflicts of interest and expanding disclosure obligations.
We invite medical device and pharmaceutical companies to review the new regulation and contact beginning of a trend or the first step toward the us with any questions that may arise.
K&L Gates comprises multiple affiliated partnerships: a limited liability partnership with the full name K&L Gates LLP qualified in Delaware and maintaining offices throughout the U.S., in Berlin and Frankfurt, Germany, in Beijing (K&L Gates LLP Beijing Representative Office), in Singapore
(K&L Gates LLP Singapore Representative Office), and in Shanghai (K&L Gates LLP Shanghai Representative Office); a limited liability partnership
(also named K&L Gates LLP) incorporated in England and maintaining our London and Paris offices; a Taiwan general partnership (K&L Gates) which practices from our Taipei office; and a Hong Kong general partnership (K&L Gates, Solicitors) which practices from our Hong Kong office.
K&L Gates maintains appropriate registrations in the jurisdictions in which its offices are located. A list of the partners in each entity is available for inspection at any K&L Gates office.
This publication is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer.
©2009 K&L Gates LLP. All Rights Reserved.
April 2009 5